view picture Suppose that after World War II, the United States and Germany agree to peg their currencies to each other under the Bretton Woods system at anexchange rate of $2.00 per mark. Suppose American demand for marks decreases, and the equilibrium dollar price of a mark falls to $1.50 per mark.Which of the following actions could the U.S. government use under Bretton Woods to help eliminate the balance-of-payments imbalance at thepegged exchange rate?Use official reserves of marks to buy dollars in the foreign-exchange market.Exchange dollars for marks in order to buy gold from Germany.Increase U.S. income taxes.

Countries agreed to tie their currencies to the US dollar, which was tied to gold, under the terms…

Answered: Suppose that after World War II, the…

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: International Finance

Section: Chapter Questions

Problem 4QP

See similar textbooks

Similar questions

List some advantages and disadvantages of the different exchange rate policies.
Suppose that after World War II, the United States and France agree to peg their currencies to each other under the Bretton Woods system at an exchange rate of $2 per franc. Suppose American demand for francs increases, and the equilibrium dollar price of a franc rises to $3 per franc. Which of the following actions could the U.S. government use under Bretton Woods to help eliminate the balance-of-payments imbalance at the pegged exchange rate? Borrow French francs from the IMF and use the francs to buy dollars. Exchange dollars for francs in order to buy gold from France. Decrease U.S. income taxes,
Figure 18-4 Exchange rate (S/E) $4 3 2 0 x D 2.0 2.3 2.7 S Quantity of pounds traded (millions per day)
If the domestic prices for traded goods rose 50 percent over 10 years in Japan and 100 percent over those same 10 years in United States, what would happen to the yen/dollar exchange rate? Why?
If to ship any amount of gold between New York If to ship any amount of gold between New York and London costs 1 percent of the value of the gold shipped, define the U.S. gold export point or upper limit in the exchange rate between the dollar and the pound (R = $/£). Why is this so? If to ship any amount of gold between New York
Do you feel the US role as the "guarantor" for the Bretton Woods System was viable? Why or why not? How does Monetary Policy influence exchange rate levels? Please explain. If a country raises short-term interest rates, what can be the impact on its currency? If a country lowers short-term interest rates, what can be the impact on its currency? What are the causes, and consequences, of debt crises?
The following graph shows the market for euros, which is initially in equilibrium. Suppose an economic expansion in the United States leads to an increase in the incomes of American households, causing imports from Europe to rise. On the graph, illustrate the effect of an economic expansion on the market for euros by shifting the appropriate curve or curves. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. EXCHANGE RATE (Dollars per euro) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0 02 4 6 || 8 12 QUANTITY OF EUROS (Billions) Supply 10 Demand 14 16 Demand Supply Flexible exchange rates Fixed exchange rates (?)
Balance of payments accounting. For the following international transactions, identify the balance of payments accounts and whether the transaction would generate an inflow or an outflow of foreign exchange for the two countries involved. ■ TIAA-CREF—the pension fund of American college professors—purchases 1 million shares of South Africa’s Standard Bank for $16 million. ■ Air France purchases $2.5 million of jet fuel at Boston’s Logan Airport. Payment is made directly from Air France’s bank account with State Street in Boston. ■ Hong Kong–based Cathay Pacific pays a $25 million annual lease on two Boeing 777s to U.S.-based lessor GE Capital.

Recommended textbooks for you

Macroeconomics

Economics

ISBN:

9781337617390

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Macroeconomics

Economics

ISBN:

9781337617390

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Microeconomics

Economics

ISBN:

9781337617406

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Economics (MindTap Course List)

Economics

ISBN:

9781337617383

Author:

Roger A. Arnold

Publisher:

Cengage Learning

Micro Economics For Today

Economics

ISBN:

9781337613064

Author:

Tucker, Irvin B.

Publisher:

Cengage,

Survey Of Economics

Economics

ISBN:

9781337111522

Author:

Tucker, Irvin B.

Publisher:

Cengage,

Economics For Today

Economics

ISBN:

9781337613040

Author:

Tucker

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS